Expat wins long, lonely fight to keep his investment

by Garland M Baker on October 13, 2008

No thanks to the impotent criminal courts

After four long years of fighting hard in the courts in Costa Rica, an expat saved his property investment. He thought all hope was lost, but in his case justice prevailed. Last week the expat had what was stolen from him returned: A mortgage fraudulently canceled by property thieves and an attorney gone bad.

The result of this expat’s long legal battle shows that the criminal courts are impotent in fighting crime. His case proves there is a way to use the civil courts to get back properties that were illegally transferred or manipulated.

Here is the story:

The expat owned a beautiful house located in Escazú. He decided to move back to Florida in 2000 and sold the house to a sociedad anónima or corporation represented by Costa Ricans. The buyer — in this case, the company — could not pay the full price for the property and needed a loan for $100,000. The seller obliged and carried back a mortgage. The amount due was to be paid in a lump sum after five years, and 10 percent annual interest was to be paid monthly.

The company that bought the property sold it three months later to another Costa Rican firm that accepted the mortgage that existed on the home. This is done all the time, selling something with a lien or other encumbrance to another person. It is perfectly legal as long as both parties agree to the transfer accepting the encumbered title. Original creditors do not need to agree to the transfers or approve new debtors, so the expat never was notified of the transaction.

Interest payments were made until 2003 and then they stopped. The expat was in the hospital in the United States and could not come to Costa Rica to see what had happened. He finally contacted a lawyer to check on the status of the mortgage only to find it had been canceled. Yes, canceled.

In June of 2003, a mortgage cancellation document was filed with the Registro Nacional. The document fraudulently showed that the expat had appeared in front of a notary in Costa Rica to sign the cancellation. This happened while the expat still was in Florida.

The expat started two court cases in Costa Rica, a criminal action and a civil one. The two cases have different stories. The criminal case started off with a bang. The property deed was frozen by the court and an annotation was made on the file at the Registro Nacional. Soon after the prosecutor took this action, the prosecutors’ office found that the attorney who prepared the mortgage cancellation had 40 other accusations against him for similar frauds.

They found the attorney to be a hardcore drug addict fraudulently transferring properties and canceling mortgages and other liens to support his drug habit. For one reason or another, the prosecutors’ office lost interest in the case and did no more to move it forward. As of today, the case has not even reached the preliminary audience stage and is surely expired by now.

The civil case started off slowly with no serious action for many months. Finally, a judge in San José ruled in December of 2006 that the mortgage had to be re-registered. This only occurred after the lawyer representing the expat submitted a multitude of legal documents to prove the expat was out of the country when the property mortgage was canceled.

The defendants disappeared. They thought that by hiding they could avoid the case. They were almost right. The civil court could not find them and did not try very hard to do so. The expat had to spend hundreds of dollars paying private investigators to locate the accused to serve them with court papers. Without this extra effort, the expat would have lost everything.

It took one year and nine months to find the individuals that conceived and carried out the crime. They were finally found and served with the civil judgment. This is a legal requirement by the courts here before a judgment is final.

At this point, the expat has paid thousands of dollars to get the mortgage reinstated. The ordeal is not over yet. However, there may be some good news. Now he can execute the mortgage and take the property to public auction. At this auction, depending on how much is bid, he may get his principal back with all back interest and attorneys fees. If no one shows up at the auction, he could even get the property back. This would be true justice to pay him back for everything he has suffered over the last four years.

Civil law in Costa Rica protects innocent third parties in a transaction, whereas, criminal law protects victims. In layman’s terms, this means that if something is stolen from someone and then sold to another person the criminal courts — in theory — should give it back to the rightful owner. The civil courts would let the current owner keep the thing.

However, Civil Law Article 1061 states that if something is never rightfully owned, it cannot be transferred to another person. Doing so is a null transaction. In the case of property fraud, most transactions are fraudulent, so they are null and void in the eyes of the civil court, and rightful owners are protected.

Today, in Costa Rica the criminal court system is a mess. It is ineffective for those using it to fight criminals. Depending on the circumstances of a particular case, it is better to use the civil courts.

In this case, the people who set up this expat and stole from him will never be punished for what they did. The criminal court did virtually nothing and did not even look for the crooks. The only reason the retired man prevailed is because he took the fight into his own hands and paid heavily to get justice.

Costa Rica Expertise LLC

Garland M. Baker is a naturalized citizen who has resided in Costa Rica since 1972. Lic. Allan Garro is a prestigious Costa Rican attorney and notary. They provide multidisciplinary professional services to the international community, and act as consultants in many cases published here.